NCCI Updates on Payrolls and Experience Mods – COVID-19

The National Council of Compensation Insurance (“NCCI”) has come out over the last few days with some important calls in regard to CoVid-19. 

Foremost, the NCCI is changing the class code for those that are still being paid and work from home, but under a different scope of employment.

Secondly, many States continue to revise their triggers for “presumptive coverage” for workers’ compensation.  In all States, first responders are considered to be covered on an occupational basis.  In others, the definition has been expanded to “health care workers”.  In others (ie Illinois), this definition has been expanded beyond first responders and health care workers to pretty much anyone that could be public-facing to include workers in restaurants, retail stores, grocery stores etc.

Lastly, the NCCI has decided that CoVid-19 claims should not be applied to experience modifications.  It is yet to be seen the 10 independent bureaus follow suit, but this is a big deal for those that are on guaranteed cost programs

Part 2 of our NAPEO CoVid-19 seminar on workers’ compensation with NAPEO is tomorrow at 2:30.  Hope to see you on the call —-

The below the latest from our friends at the NCCI –

Employers May Exclude Payroll to Employees Not Working for Workers’ Comp: NCCI

By | April 20, 2020

Businesses that have suspended operations due to COVID-19 but continue to pay employees who are at home but not working will not have to include the payroll paid to these employees in the calculation of their workers’ compensation premium.

The National Council on Compensation Insurance (NCCI) is preparing a reporting code that will be filed for approval by state regulators. The organization hopes to file it this week.

NCCI, the industry’s largest workers’ compensation data and rating organization, will file the change in the 36 states where it is the official rating bureau.

“We’ve had a meeting already with the insurance regulators telling them that it’s coming and sharing some information with them so that they’re ready for it and we hope that they’ll do a quick approval, Jeff Eddinger, senior division executive, Regulatory Business Management, for NCCI told Insurance Journal.

California’s rating bureau has already announced its own rule that this payroll paid during the shutdown will be excluded from reportable payroll. Other states with their own rating bureaus or monopolistic state funds are expected to follow suit.

Citing a desire for consistency across states, the North Carolina Rate Bureau told Insurance Journal it is waiting to see the NCCI rule change and will likely file that language for use in North Carolina.

The rule change is for payroll for people who can’t do their normal jobs from home, but are still getting paid. Without this rule change, that payroll would be included in calculating the employer’s workers’ comp premium. A workers’ comp premium is based on payroll.

“The rule change is going to basically take the payroll for that period of time where the worker’s furloughed and remove it from the calculation,” said Eddinger,

“You can make an argument that while they’re not doing their job, they don’t need workers’ comp coverage so the employers don’t need to pay the premium for that time.”

The trade-off is that a company that excludes an employee’s payroll can’t report any claims for that employee, Eddinger added.

The rule will be retroactive, most likely to March 1. How long the code will remain available will depend on how long shutdowns are in effect.

He said NCCI considered using an existing code for idle workers but determined a new rule would be better.

In another change, NCCI will also begin tracking COVID-19 related claims.

Eddinger does not think the payroll rule change will have a material impact on workers’ compensation carriers.

“It’s like hitting the pause button so you’re not charging premiums, but you also don’t expect any claims so in the end you think that it’s just going to be a wash,” he said.

It’s similar to the situation with auto insurers giving discounts on premiums for certain months, knowing that there will be less traffic and thus fewer claims.

Here is how NCCI’s explains the move on its website:

“NCCI recognizes that circumstances around COVID 19 are extraordinary and warrant an expedited rule change to address the question of payroll for employees who are being paid but are not working as it relates to the basis of premium. If approved, this rule change will be distinct from “idle time” under our current Basic Manual rules (Rule 2-F-1), and a corresponding statistical code 0012 will be created for reporting this payroll. This payroll will not be used in the calculation of premium.”

NCCI has a COVID Resource Center on its website that includes answers to frequently asked questions and a new analysis of the economics impact of coronavirus on the workers’ compensation industry.

Brief Update on Recent Activities By David Daniel, Florida PEO Lobbyist

Image result for florida

Update on Recent Activities related to COVID-19 from FAPEO –

There is a lot of COVID-19 related activity we have been working on for Florida PEOs as we face these uncertain times.  This email is intended summarize our recent work.

Emergency Orders at DBPR

With the required annual financial reports due to the Department of Business and Professional Regulation we contacted Secretary Beshears and asked that he issue an order delaying their due date.  Secretary Beshears indicated to us would be taken care of.

DBPR Emergency Order 2020 – 01 was issued March 16.  In the order Secretary Beshears suspends and tolls for 30 days any existing renewal deadline for a license, permit registration or certificate.

DBPR Emergency Order 2020 – 03 was issued March 23, 2020.  The order suspends and tolls through May 31, 2020 all time requirements, notice requirements and deadlines for final agency action or applications for permits, licenses, rates and other approvals under any statutes or rules.

Unemployment Compensation

As you can imagine there are reports from DEO of increased filings for unemployment compensation insurance.  While the UC Fund has significant resources available, as we have seen in the last recession, the unemployment compensation trust fund can go from flush to negative in a short amount of time.

It is expected with the dramatic decline in business activity related to the social distancing and businesses closures, employers will be forced to make some tough decisions with their workforce.  As you know, 443.131 F.S allows the Department of Economic Opportunity the ability to not charge an employer’s unemployment compensation contribution rate for a declared national disaster or an disaster of national significance.  Further, 443. 116 F.S. creates the short-time compensation program which allows an employer to reduce work for employees in lieu of layoffs with DEO approval.  We have requested DEO make the decision that this event and the subsequent layoffs which will follow are not chargeable to an employer’s unemployment compensation rate.  Further we have asked that if an employer chooses a short-time compensation arrangement it would also not be chargeable to their UC rate.

To that end, last week Governor DeSantis indicated in a press conference this event would not be charged to an employer’s unemployment compensation rate.  We are awaiting the official announcement from DEO.  There is no word yet on the short-time compensation and will let you know when we hear more from DEO.

Essential Business Sectors under CISA Guidance

The state and the country have been grappling with the impacts of decisions on social distancing, shelter in place orders and mandatory business closures.  Several counties have already issued emergency orders closing non-essential employers including Miami-Dade, Broward, Alachua and Duval counties.  We have asked the Governor’s Office to include professional employer organizations as essential critical infrastructure workers in any statewide emergency order mandating business closure.  At the direction of the Governor’s Office, we have based our request on Cybersecurity and Infrastructure Security Agency guidance.  (See attached)

While the decision to issue a statewide emergency order closing all non-essential businesses has as not been made to date, our proactive efforts have placed us in the best possible position to remain open.

Additional Readings – Statues Issued

443.131 F.S. – Click here to read more.

443.1116-F.S. – Click here to read more.

DBPR – Emergency Order 2020 – Click here to read more.

CISA Guidance on Essential Critical Infrastructure Workers – Click here to read more. 

State of Florida Emergency Order – Click here to read more.

 

Components of COVID-19 Relief Legislation

Below is a summary of the COVID-19 Relief Package from our friends at FisherBroyles

Components of H.R. 6201, COVID-19 relief legislation Temporary Expansion of Family and Medical Leave

  • H.R. 6201 would require employers with fewer than 500 employees to provide up to 12 weeks of job-protected leave, ten weeks of which would be paid.
  • Leave would be for “qualifying need related to a public health emergency.”
  • Qualifying need is defined as to mean “the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school [meaning a primary or secondary school only] or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.”
  • A “public health emergency” is then defined to mean “an emergency with respect to COVID-19 declared by a Federal, State, or local authority.”
  • The leave applies to employees who have been employed for at least 30 calendar days, rather than the 12-month period under the current FMLA.
  • The Secretary of Labor has the regulatory authority to exempt employers with fewer than 50 employees if the provision of paid FMLA leave “would jeopardize the viability of the business as a going concern.”
  • Employers with 25 or more employees would be required to reinstate employees after their FMLA leave period ends.
  • Employers with fewer than 25 employers do not have to reinstate an employee if they are experiencing significant economic hardship.
  • The first 10 days for which an employee takes leave could be unpaid leave, or the employee could choose to substitute any accrued vacation, personal or sick leave (including in certain instances the emergency paid “sick” leave described below).
  • After the initial 10 days, the employer would be required to provide paid leave based on an amount that is not less than two-thirds of an employee’s regular rate of pay and the number of hours the employee would otherwise be normally scheduled to work.
  • The bill caps the amount of the paid leave, per employee, to no more than $200 per day or $10,000 in the aggregate.
  • This provisions would be effective “not later than 15 days after the date of enactment.”

Creation of a Temporary Paid Sick Leave Program

  • H.R. 6201 requires employers to provide full-time employees with 80 hours of certain emergency paid “sick” leave related to the coronavirus (with special rules for part-time employees).
  • The paid sick leave could be used in any of the following circumstances:
    • The employee is subject to a federal, state or local quarantine or isolation order related to COVID-19.
    • The employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19
    • The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
    • The employee is caring for an individual who
      • Is subject to a federal, state or local quarantine or isolation order related to COVID-19, or
      • Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
    • The employee is caring for a son or daughter where the school or place of care of the son or daughter has been closed or the child care provider of such son or daughter is unavailable, due to COVID-19 precautions.
    • The employee is experiencing any other substantially similar condition specified by the Secretary of HHS in consultation with the Secretary of the Treasury and the Secretary of Labor.
  • Full-time employees would be entitled to 80 hours of paid leave
  • Part-time employees are entitled to “a number of hours equal to the number of hours that such employee works, on average, over a 2-week period.”
  • The required paid leave ends with the employee’s next scheduled work shift following the end of the qualifying need.
  • The required sick pay is calculated based on the employee’s regular rate of pay or, if higher, the applicable minimum wage rate.
  • In the case of leaves to care for a family member or child, however, the required sick pay is based on 2/3rds of the regular rate of pay.
  • For part-time employees whose schedule varies from week to week, special rules apply to calculate the average number of hours.
  • The maximum amount of required sick pay per employee is $511 per day and $5,110 in the aggregate.
  • In the case of leaves to care for a family member of child, however, the maximum amount of required sick pay per employee is $200 per day and $2,000 in the aggregate.
  • The bill imposes notice requirements and prohibits employers from discharging, disciplining or discriminating against employees who take paid sick leave.
  • The Secretary of Labor is instructed to provide a model notice within seven days after enactment.
  • An employer is also prohibited from requiring employees to look for or find replacement employees to cover the hours during which the employee is using the paid sick time.
  • Violations are punishable under the FLSA.
  • The paid leave provisions go into effect “not later than 15 days after the date of enactment” and expire on December 31, 2020.

Refundable Tax Credits to Pay for Leave

  • H.R. 6201 provides provide a series of tax credits to those employers subject to expanded FMLA and emergency paid “sick” leave requirements.
  • The employer-related credits, which are refundable, would be applied against the employer portion of Social Security taxes for each quarter equal to the “qualifying” paid leave wages paid by the employer.
  • The tax credits would apply with respect to both the FMLA-expanded paid leave as well as the emergency paid “sick” leave.
  • The amount of the tax credits varies based on the type of leave.

Tax Credit for Expanded FMLA Leave

  • H.R. 6201 would provide employers a refundable tax credit equal to 100 percent of the “qualified family leave wages” that the employer is required to pay for a given quarter under the Expanded FMLA Leave.
  • The amount of the qualified family leave wages that would be taken into account for purposes of the credit per employee is $200 for any day for which the employer pays the employee qualified family leave wages, up to a maximum amount for all calendar quarters of $10,000 per employee.

Tax Credit for Emergency Paid “Sick” Leave

  • H.R. 6201 would provide employers a refundable tax credit equal to 100 percent of “qualified sick leave wages” that the employer is required to pay for a given quarter under the Emergency Paid Sick Leave Act.
  • The amount of qualified sick leave wages for purposes of the credit would vary depending upon the reason for the leave.
  • For employees who must self-isolate, obtain a coronavirus diagnosis or comply with a self-isolation recommendation from a public official or health care provider, the amount of qualified sick leave wages taken into account is capped at $511 per day.
  • The bill also allows for an increase in the amount of the tax credit equal to the amount “of the employer’s qualified health plan expenses as are properly allocable to the qualified family [or sick] leave wages for which such credit is allowed.”
  • The tax credit would apply to wages the employer pays between (1) a date that the Secretary of the Treasury must specify within 15 days after the date of enactment and (2) December 31, 2020.

Free Coronavirus Testing

  • H.R. 6201 would require that group health plans and health insurance issuers of group to cover FDA- approved COVID-19 diagnostic testing products.
  • Cost covered include the items and services furnished during a provider visit (office, telehealth, urgent care and emergency room) to the extent those items and services relate to the furnishing or administration of the testing product or the evaluation of the individual’s need for the testing product.
  • The mandated coverage must be provided without “any cost sharing (including deductibles, copayments and coinsurance) requirements or prior authorization or other medical management requirements.”
  • The requirement to cover COVID-19 testing costs starts from the date of enactment until the Secretary of HHS determines that the public health emergency has expired.

To see COVID-19 information, please visit fisherbroyles.com

Department of Labor Issues Final Rule to Allow Associations and PEOs to Sponsor Retirement Plans

REIT
Final rule defines a PEO as an employer under ERISA and clarifies rules for PEOs to offer retirement benefits

On July 29, 2019, the Department of Labor (the “Department”) issued a final rule to facilitate and expand the availability of multiple employer defined contribution plans (“MEPs”). The final rule provides clarity regarding the types of “bona fide” groups or associations of employers as well as professional employer organizations (“PEOs”) that are permitted to sponsor retirement plans.

NAPEO supports the rule, as it is another step in in formalizing the legal framework for PEOs to provide benefits for their client’s shared employees. This action, along with the passage of the Small Business Efficiency Act contained in the Tax Increase Prevention Act (H.R. 5771, Public Law 113‐295) which created the voluntary IRS PEO Certification Program, demonstrates the federal government’s recognition of the PEO industry and the important role it plays in supporting our nation’s small businesses.

With respect to PEOs, the final rule does two things. First, it states that a “bona fide” PEO is capable of establishing a MEP. The rule then creates a safe harbor criteria for determining whether a PEO that sponsors a MEP is performing essential employment functions.

A copy of the final rule can be found here.

A summary of the final rule can be found here.

A detailed analysis on this issue from the Groom Law Group can be found here.

A recording of a NAPEO-sponsored webinar on this issue can be found here.

A copy of NAPEO’s comments on the proposed rule can be found here.
NAPEO Article can be found:

https://www.napeo.org/advocacy/what-we-advocate/federal-government-affairs/peos-retirement-regulation/dol-meps-finalrule

 

 

Potential Wage and Hour Claims Due to New Overtime Rule

Woman working at desk

This article was originally published on InsuranceJournal.com.

Time is running out for employers to familiarize themselves with new federal rules on overtime pay.

Starting January 1, the threshold for who is entitled to overtime pay — and who is not — changes. It’s the first change since 2004.

The new rule raises the income threshold that employees must reach to $684 per week, or $35,568 per year, to qualify as exempt from overtime. Employers are allowed to count up to 10% (or $3,556.80 per year) in bonuses or commissions towards the threshold.

Workers making less than the threshold are entitled to earn one and one-half times their regular rate of pay for all hours over 40 during a work week.

Failure to properly implement the new regulations could expose employers to wage-and-hour type claims under the Fair Labor Standards Act (FLSA).

For some employers, that could mean employment practices liability insurance claims.

That’s one reason Chris Williams is trying to raise awareness. Williams is employment practices liability product manager for Travelers. He is responsible for employment practices underwriting strategy, including policy language, target markets, overall profitability of the book, marketing, and serving as a general resource for underwriters on employment practices.

In a recent talk with Insurance Journal, Williams discussed the overtime rule change and what it means for employers, employees and insurance.

There’s so much else going on in the area of employment practices, the overtime pay issue hasn’t gotten much attention.

“That is a concern because the law’s already fairly complicated for employers to comply with,” Williams said. “Then, anytime you have a change in a complex law, you’re likely to see one, compliance challenges, and two, potential litigation coming out of that.”

Williams said the starting point is understanding the basics of the current rule compared to the new rule that starts in January.

Under the FSLA, employees that satisfy three requirements — they are paid on a salary basis, they are paid more than $23,660 per year, and they perform certain functions considered executive, administrative, or professional duties — are currently not entitled to overtime wages.

“For example, if you’re an executive, you’re a manager in an organization, you’re managing folks, you have the ability to hire, to fire people, and you make more than $23,660 per year, you are not entitled to overtime,” he explained.

Exempt executive, administrative and professional employees include teachers and academic administrators in elementary and secondary schools, outside sales employees and employees in certain technology occupations, according to the Department of Labor. Certain casual, seasonal and farm workers are also exempt from the overtime requirement.

For the new year, while the definitions and exemptions for those doing executive, administrative, professional and other work remain, the key change for employers to be aware of is that the salary threshold is going up from $23,660 to $35,568 per year.

“As a result of that, you’re going to have folks that are now within that pay band that are going to be entitled to overtime that previously weren’t entitled to overtime,” Williams said.

“Employers are going to have to one, figure out who those individuals are. And two, they’re going to have to make sure they’re tracking their time, and if those folks are working more than 40 hours per week, they’re going to have to make sure that they’re compensated on a time-and-a-half basis for that time in excess of 40 hours per week.”

While $35,568 is the threshold and where the primary impact is felt, there is also an upper limit as well. The high threshold under what is called the highly-compensated employee rule is going from $100,000 to $107,432.

“In other words, if you make more than $107,000, you have some administrative or executive functions within the organization, and you’re doing non-manual work, you’re not going to be entitled to overtime,” he explained.

The upper limit rarely is an issue. “We don’t see very much claim activity arising out of those individuals. It’s much more on the lower spectrum,” Williams noted.

In addition to the federal rule, depending on the state they are in, employers may have state laws on overtime pay they must follow as well. California is one such state.

“Employers in those situations are obligated to comply with both the state and the federal law. For example, in California, most of our overtime wage claims that we see pertain to state law as opposed to claims under the Fair Labor Standards Act,” he said.

Williams sees a few potential trouble spots for employers.

“One of the things we see today is employers, and I don’t think a lot if it is malicious, I just think it’s a misunderstanding of what their obligations are, but they may not pay their employees overtime.

“They may not correctly classify individuals as exempt or not exempt, meaning they’re entitled to overtime. They may not track their time correctly.”

Another area is claims for not compensating workers for time they spend putting on their gear to prepare for work. “If you work in a meat processing plant or something like that, you have to put on protective gear, and then you weren’t compensated for that time,” he said.

There are things employers should do to prepare for the new overtime situation, according to Williams.

“Employers will want to go back and make sure that they’ve correctly identified who is now entitled to overtime and are they, in fact, tracking their time and making sure those individuals are compensated correctly.

“It’s probably a good idea, given this change in the law, to review all your employees and make sure that you classify them correctly and you’re tracking their time properly and that you’re compensating them appropriately.”

Williams also noted that some employers may decide to raise the salary of their workers above the threshold of $35,568 to avoid an overtime issue. However, in order to avoid paying overtime for those workers, the employer would need to make sure the worker also qualified for an exemption under professional, administrative or executive.

“In other words, if the employer raised the salary of a worker above $35,568 per year, and the worker did not qualify for one of the exemptions, the worker would still be entitled to overtime,” he said.

Williams recalled that happened in some cases after the Obama Administration in 2016 initiated an even high threshold of $47,000. Some employers increased the pay of some of the workers beyond that threshold. But then the Obama change was struck down in court in September 2017 when a judge ruled that the ceiling was set too high and might apply to some management workers who are supposed to be exempt from overtime pay protections. Business groups and 21 Republican-led states had sued to challenge the 2016 rule.

The Department of Labor estimates that 1.2 million additional workers will be entitled to overtime pay as a result of the increase to the standard salary level, while an additional 101,800 workers will be entitled to overtime pay as a result of the increase under the highly-compensated employee rule.

Williams urges agents to advise their clients to take advantage of resources available to them to be sure they are in compliance— whether that be a human resources department, payroll processor or general counsel. He also recommends the DOL’s website that has information about the final rule.

Williams added that a number of insurance carriers including Travelers also have resources available. “It’s sort of a matter, one, of employers educating themselves, and then, two, taking action on that information,” he said.

Wage-and-Hour Claims

Those caught not in compliance could face wage-and-hour claims. Defense costs only for such claims may be covered under employment practices liability insurance (EPLI) but only for those purchasing a separate endorsement under their EPLI. It’s not part of the traditional EPLI. (Coverage of unpaid wages may be available to large firms with sizable self-retentions but this coverage is not typically available to small and medium firms.)

“A lot of carriers, including Travelers, will provide a sublimit that applies to defense expenses only for wage-and-hour claims. That generally includes issues like failure to pay overtime, misclassifying workers as exempt, potentially misclassifying workers as independent contractors when they’re in fact employees,” Williams explained.

There are certain state statutes, like in California, where employers are obligated to provide rest and meal periods. The separate coverage would include defense expenses for those types of claims as well.

Travelers offers a sublimit up to $250,000. “I think the market’s generally between $100,000 and $250,000, and there may be some outliers beyond that,” he said.

Since it’s been 15 years since the overtime rule was changed, this is in a way a new exposure, one agents may want to explore with clients.

“I think that’s a good idea. We sell this coverage to privately held companies and nonprofits, and we try to be proactive in selling it because it’s an exposure for employers that’s out there,” Williams said.

He noted that these claims are attractive to the plaintiffs’ bar because there is a fee shifting provision in the statute so that if the plaintiff prevails on the claim, they’re entitled to their attorneys’ fees. “You can have cases where the actual recovery amount may not be that significant in terms of the unpaid wages, but the attorney fee is potentially significantly more than that unpaid wage portion,” he said.

Other EPLI Issues

Overtime is hardly the only pressure on employment practices liability insurance (EPLI) these days when workplace issues are in the news on a regular basis.

EPLI provides protection against many kinds of employee lawsuits including claims alleging sexual harassment; discrimination based on age, race, gender or disability; wrongful termination, hiring or promotions; retaliation and wrongful infliction of emotional distress.

According to Williams, there are two areas in particular where EPLI is currently seeing increasing claims activity: sexual harassment and privacy.

“I’ll start off with the sexual harassment, and there’s been an uptick, particularly in severity, on those claims. There’s been an uptick in the frequency of those claims as well. It’s a challenging environment to litigate one of those cases in,” he said.

The second issue is biometric claims, driven by the Illinois biometric information privacy act.

“One of the requirements under that is that if you’re going to use biometric information of your customers or employees, you have to get a signed release from the employee or customer,” he said.

A number of employers have been using fingerprint technology to scan employees in and out and to clock when they’re coming and leaving work. In many cases, they did not get a signed release from the employee. “That’s resulted in class action claims brought against those employers alleging violation of this statute, sort of quasi-invasion-of-privacy claims,” he said.

Other claims areas that are relatively new include websites not in compliance with the Americans with Disabilities Act. “The website isn’t compliant if it doesn’t allow the disabled individual full use of that website because it hasn’t been programmed properly,” he said.

Travelers is among the insurers that will provide workplace violence expense reimbursement coverage that reimburses employers for certain expenses in the event of a workplace violence event. The expenses might include counseling, additional security, and services of a public relations firm to help a business through the crisis.

An employment practice claim is not a recommended experience.

“No one’s ever gone through an EPLI claim— which is a tremendously burdensome process in terms of the documents that have to be turned over, all the emails, the personnel files, the deposition the employer has to go through— no one’s gone through that process and ever said, ‘Boy, we’d like to do that again,’” Williams said.

Trump Administration Issues New Rule on Joint Employer Liability

The joint employer saga continues…see below from Insurance Journal regarding the Trump Administration’s announcement yesterday.

The Trump Administration announced a final rule setting forth standards for determining joint employer status under the Fair Labor Standards Act (FLSA), a rule that has been sought by franchisers and companies that employ contract workers.

The new rule from the Department of Labor, which will become effective in 60 days, is a departure from a legal interpretation adopted by the Obama Administration in 2016 and a 2015 ruling by the National Labor Relations Board (NLRB) that expanded joint employment situations and made it easier for workers to sue their employers.

The new DOL rule, while not legally binding, does guide consideration of whether companies are classified as joint employers of workers and thereby can be held responsible for labor violations including requirements on minimum wage and overtime pay. The rule can affect franchising companies, contractors, temporary staffing, cleaning agencies and similar firms.

The issue has been central to several cases involving the chain McDonald’s and whether it can be held liable for alleged labor violations in its franchisees’ restaurants. Last month McDonald’s won a 2-1 victory before the current NLRB with Trump appointees—agreeing to pay $170,000 to settle workers’ claims against its franchisees but also winning a ruling that frees it from direct responsibility as a joint employer.

The Obama administration had backed worker advocacy groups in the litigation against McDonald’s.

The Obama standards for determining whether there is joint employer status themselves departed from long-standing precedent and made it easier for workers to sue their employer.

In its final rule, the Trump DOL provides a four-factor balancing test for determining FLSA joint employer status in situations where an employee performs work for one employer that simultaneously benefits another entity or individual. The balancing test examines whether the potential joint employer:

  • Hires or fires the employee;
  • Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  • Determines the employee’s rate and method of payment; and
  • Maintains the employee’s employment records.

A business would not have to meet all of these criteria to be considered a joint employer.

The rule also sets forth when additional factors may be relevant to a determination of FLSA joint employer status and identifies certain business models, contractual agreements with the employer, and business practices that do not make joint employer status more or less likely.

Recent History

In a decision known as Browning-Ferris Industries, the NLRB in August 2015 overturned established precedent for determining whether a joint employer relationship exists under the National Labor Relations Act. Legal guidance adopted by the Obama DOL in 2016 reflected the expansion of joint employer liability cited in the Browning-Ferris ruling. For example, it considered a franchiser a joint employer not only if it exercised direct control of employees’ activities, but also if it had “indirect” or even “potential” control.

The Trump DOL withdrew the Obama guidance in 2017.

Writing in the Wall Street Journal, DOL Secretary Eugene Scalia and White House Chief of Staff Mick Mulvaney said the new rule should clarify the situation affecting these relationships and relieve companies of a potential liability.

“The new rule also gives companies in traditional contracting and franchising relationships confidence that they can demand certain basic standards from suppliers or franchisees—like effective antiharassment policies and compliance with employment laws—without themselves being deemed the employer of the other company’s workers. That will help companies promote fair working conditions without facing unwarranted regulatory costs,” the Trump officials wrote in the Wall Street Journal.

The International Franchise Association (IFA) praised the new rule as a “return to a simple, clear, and thoughtful joint employer standard.” IFA has argued that the Obama standard increased lawsuits against employers, cost jobs and sapped the American economy of $33.3 billion per year.

Robert Cresanti, IFA president and CEO, said the four-part test to determine employer status can clarify joint employer status, employer liability, and the roles and responsibilities of each party in a business relationship.

Worker groups have argued that a narrowing of the rule will create an incentive for large employers to outsource more jobs.

Rebecca Dixon, executive director of the National Employment Law Project, said the new rule “makes it easier for corporations to cheat their workers and look the other way when workplace violations occur.”

The liberal Economic Policy Institute has said workers could lose $1.3 billion in wages annually under the new rule.

There is more to come on the issue from the Trump Administration. While the DOL standards are not legally binding, the NLRB joint employer rule is. The NLRB is close to finalizing its own rule.

https://www.insurancejournal.com/news/national/2020/01/13/554657.htm

What is California’s Assembly Bill 5?

On January 1, 2020, Assembly Bill (AB) 5 will go into effect and may impact whether your workers are treated as employees or as independent contractors under California law.

The state has launched a new website with information, including Frequently Asked Questions, to help you understand the ABC test (a 3-part test to determine whether an employee could be classified as a contractor rather than an employee), AB5, and your obligations as an employer.

Please visit Labor.ca.gov/employmentstatus, which contains information from various state entities.

DOL Issues New Salary Limits for Overtime Exemptions

OVERVIEW

On Sept. 24, 2019, the U.S. Department of Labor (DOL) announced a new final rule that updates the salary thresholds that some individuals must meet in order to qualify for a
minimum wage and overtime exemption under the federal Fair Labor Standards Act (FLSA). The final rule becomes effective on Jan. 1, 2020. The final rule affects the exemptions for executive, administrative and professional (EAP) employees, highly
compensated employees (HCEs), employees in the motion picture industry and individuals who work in various U.S. territories.

ACTION STEPS

The final rule’s Jan. 1, 2020 effective date leaves little time for employers to prepare for the changes. Employers should:

  • Determine which currently exempt employees have
    salaries below the new threshold; and
  • Decide whether to increase salaries for these
    individuals or reclassify them as non-exempt
    employees.

The 2019 Overtime Final Rule

As expected, this final rule includes updates to the standard salary level for the EAP and HCE exemptions and allows employers to count up to 10 percent of an employee’s nondiscretionary bonuses and incentive payments (including commissions) as part of the employee’s standard salary level. The rule also creates special standard salary levels for the exemption that applies to employees in the motion picture production industry and some U.S. territories. The table below shows the salary levels for the EAP and HCE exemptions that will apply on Jan. 1, 2020. The final rule’s salary levels are different from the 2016 rule and the 2019 proposed rule.

Nondiscretionary Bonuses

The final overtime rule will allow employers to use up to 10 percent of an employee’s bonuses to satisfy salary level requirements if:

  • The bonus, commission or other incentive pay is nondiscretionary; and
  • The employee receives this incentive pay at least annually (during any given year or 52-week period).

The final rule also contains a “catch-up” provision that enables employees to remain exempt when their nondiscretionary bonuses aren’t enough to meet the salary level required by an FLSA exemption. Under this new rule, employers must make a “catch-up payment” within one pay period at the end of the 52-week period before losing that employee’s exempt status. The DOL has warned that any catch-up payment “will
count only toward the prior year’s salary amount and not toward the salary amount in the year in which it is paid.”

Additional Updates

The final rule sets a special salary level of $380 per week for American Samoa, and sets a special salary level of $455 per week for employees in Puerto Rico, the U.S. Virgin Islands, Guam, and the Northern Mariana Islands. The rule also establishes a base rate threshold for employees in the motion picture producing industry of $1,043 per week. This new threshold can be prorated based on the number of days the employee has worked. The DOL intends to update the standard salary and HCEs total annual compensation levels more regularly in the future through notice-and-comment rulemaking.

DOL Issues New Salary Limits for Overtime Exemptions